Business Investment Loan Guide for the Solo Entrepreneur

A business investment loan can help a solo entrepreneur obtain the financing necessary to acquire necessary equipment or meet other needs of their growing business. An individual starting out in business for the first time as a sole practitioner has a certain business needs that may exceed their personal ability to meet financially. Applying for a business loan or a business line of credit helps to defray those start-up expenses and become competitive.

A business investment loan funds the acquisition of equipment, inventories, technology, infrastructure and other business needs. Having adequate access to capital is necessary for every business, regardless of their business set-up or the number of owners. A solo entrepreneur may have more of a need for a business investment loan than other types of businesses.

Sole Entrepreneurs as Individuals

Banks and other lenders treat solo entrepreneurs in much the same manner as that they do individuals who apply for personal loans. A solo entrepreneur lacks the collateral and assets that a large established business may have and will need to rely on their creditworthiness, business type and profitability in order to secure a business investment loan.

Credit Ratings

Solo entrepreneurs are typically unincorporated sole proprietors. The assets of the business are the same as the personal assets of the entrepreneur. This means that the solo entrepreneur has to rely on their credit rating and other personal assets in order to secure a business investment loan. The better the credit rating of the entrepreneur, the better the opportunity for a loan. It may also be helpful for a solo entrepreneur to apply for a Data Universal Numbering System (DUNS) number.

DUNS Number

A DUNS number is used to establish credit ratings for businesses. A solo entrepreneur that establishes a separate DUNS number, in addition to their Federal Employer Identification Number (which is typically their social security number) helps improve their credit standing. This will assist a lender in determining the credit worthiness of the solo entrepreneur and improve their chances for a business investment loan.

Working with an Established Lender

A solo entrepreneur may benefit greatly from working with a bank or lender in which they have an established relationship. Working with a known lender helps the solo entrepreneur cut through much of the formalities related to establishing a lending relationship and may help the solo entrepreneur obtain a good offer, terms and rates.

A solo entrepreneur faces some challenges when applying for a business investment loan. These challenges can be overcome by following these tips in order to secure the necessary funding for their business.